Electoral Rules and Public Goods Outcomes in Brazilian Municipalities

Transcription

1 Electoral Rules and Public Goods Outcomes in Brazilian Municipalities This paper investigates the ways in which plurality and majority systems impact the provision of public goods using a regression discontinuity in Brazilian municipality election laws. My main hypothesis is that municipalities with majority systems, which are more competitive according to theories such as Duverger s law, would have higher levels of public good provision than municipalities with less competitive plurality systems. The results of this study lacked the statistical significance needed to establish definitive conclusions, but general trends suggest that majority systems do have a positive impact on the provision of public good services in Brazilian municipalities. Additionally, this study finds that two previously uncontrolled for variables - minority percentages and the percentages of households in the lowest income bracket - call into question the as-if-random nature of the regression discontinuity, which provides interesting questions for further research. * * I would like to thank my advisor, Professor Rachel Brulé, for her insight, guidance and support, and my teaching assistant, Maria Carreri, for her patience, time and guidance during this project.

2 Part I: Introduction Electoral rules are considered important in the study of democracy because they are commonly assumed to condition the chances of success of competing parties or candidates (LeDuc et al., 1996). Electoral rules shape democracies by determining which parties are elected and how many parties compete for seats, all of which can have important implications for the functioning of democracy. For example, Blais and Carty (1991) find that the average number of parties for each type of electoral system is five for plurality, seven for majority, and eight for proportional representation (PR), showing that electoral rules do indeed have major implications for how democracies function (LeDuc et al., 1996). The unanswered question is this: how do different electoral rule systems impact their citizens quality of life? To answer this I look at a discontinuity found in Brazil s mayoral election laws, where municipalities with over 200,000 registered voters use two-round majority systems and municipalities below 200,000 use oneround plurality systems. This discontinuity creates an as-if-random sample made from the municipalities close to the 200,000 threshold, as one can expect these municipalities to be similar in everything except for the electoral rules mandated by the exogenous laws. Using this as-ifrandom sample, this paper investigates the ways in which plurality and majority systems impact the provision of public goods as well as the number of effective candidates and parties. Additionally, this paper explores how the number of effective candidates and parties impact the provision of public goods, specifically literacy, school enrollment, and sewage provision. My main hypothesis is that municipalities with majority systems, which are more competitive according to theories such as Duverger s law, would have higher levels of public good provision than municipalities with less competitive plurality systems. The results of this study lacked the statistical significance needed to establish definitive conclusions, but general 1

3 trends suggest that majority systems do have a positive impact on the provision of public good services in Brazilian municipalities. Additionally, this study finds that two previously uncontrolled for variables - minority percentages and the percentages of households in the lowest income bracket - call into question the as-if-random nature of the regression discontinuity, which provides interesting questions for further research. The next section contains an overview of past literature on electoral rules, competition and public goods outcomes. In Part III the causal model and hypothesis for this paper are discussed, which is followed by a description of the data in Part IV. Part V contains this paper s research design as well as the results from the empirical analysis. Part VI contains my closing thoughts. Part II: Literature Review Many scholars (Baum and Lake, 2003; Lake and Baum, 2001; Deacon, 2009) have found a positive relationship between public good outcomes (such as life expectancy, infant mortality, literacy and school enrollment) and democracy as compared to dictatorships. Baum and Lake find that democracy causes higher levels of public health and education but that public health and education do not cause democracy, thus establishing the direction of causation (Baum and Lake, 2003). They theorize the low entry costs to participating in government in democracies creates high contestability, which incentivizes politicians to provide public goods (Lake and Baum, 2001, Baum and Lake, 2003). Deacon explains this difference in public good outcomes as a function of the size of the group in power relative to the size of the population (Deacon, 2009, 242). In order to stay in power, democratic leaders must satisfy a large fraction of the population. This is most efficiently done through providing public goods, which have large economies of scale. Both theories indicate the important role elections play in creating better public goods 2

4 outcomes for citizens of democracies as compared to citizens of autocracies. Given these findings, it is important to understand the ways in which elections within democracies can impact public goods provision. To understand why electoral systems would impact public goods provision, we need to see how they impact democracy, specifically via the party system and competition levels. Duverger s Law, the cornerstone of electoral theory, states that single-ballot plurality systems will create a two party system at the district level, whereas two-round ballots and proportional representation (PR) create multiparty systems (Cox, 1997; Fujiwara, 2011; LeDuc et al., 1996; Lijphart, 1995). Lijphart and Fujiwara argue that plurality systems create incentives for voters to vote strategically, whereas two-round majority and PR do not. Plurality systems cause voters to desert third place candidates to vote for one of the top two candidates in order to not waste their vote, effectively reducing the average number of parties from three to two (Lijphart, 1995, p. 98). In two-round majority systems, voters can still vote with their true preferences in the first round because they can vote strategically in the second. This encourages parties to run candidates in the first round, in the hopes of making it to the second. Fujiwara used the same discontinuity in Brazilian electoral laws to test Duverger s law. Fujiwara found that, as Duverger predicts, dual ballot majority systems have a decrease in voting for the top two vote-receiving candidates and an increase in voting for lower placed candidates (Fujiwara, 2011). We can therefore expect to find that plurality rules will result in two-party systems and majority rules will result in multiparty system, however the impact of such systems on governmental performance is still much debated. One theory that states that multiparty systems, and the high levels of competition they create, can provide better public good outcomes. Greater political competition is often assumed 3

5 to increase government responsiveness because it puts pressure on politicians to provide public goods in order to stay in power (Besley and Burgess, 2002, p. 1441). Electoral competition decreases candidates chances of being elected, thus in order to sway voters, incumbent candidates must provide more public goods and non-incumbent candidates must promise to provide more public goods. Besley and Burgess find that at the state level in India, the government responds with higher levels of public goods to victims of food shortages when there is greater political competition and newspaper circulation, which helps inform citizens of government actions. They also find that politicians are more likely to provide visible public goods rather than less noticeable public goods and to provide more of those goods closer to elections. This strongly suggests that politicians provide certain public goods as a way to gain positive public attention and to garner votes. Chamon et al. look more directly at the relationship between electoral rules and democratic outcomes by using this Brazilian discontinuity. They found that the possibility of a runoff election in two-round majority systems lead to increased competition, in terms of the effective number of candidates and the share of votes to lower candidates. Increased competition resulted in increased investment, specifically in the number of schools built, and less current spending, especially in personnel expenses (Chamon et al., 2010). However, there is an opposing theory that states that plurality systems with lower levels of competition can provide better public good outcomes than multiparty systems. Mainwaring argues that at the national level, Brazil s extreme multiparty system 1 and lack of party discipline have made it difficult for presidents to enact the policy they would like (Mainwaring and Shugart, 1997). Because of the high number of parties, the president s party often has a small 1 An example of this extreme multipartism is the 1990 Brazilian Elections, where nineteen parties won seats to the Chamber of Deputies (Mainwaring, 1999,p. 106). 4

6 share of seats in the National Congress, creating executive and legislative gridlock. He argues that most of Brazil s electoral rules, including the two-round majority system, encourage high levels of multipartyism at both the state and national levels, which can decrease government efficiency (Mainwaring, 1999, p. 100, 128). Lower levels of competition can allow a government to enact its policies without relying on unstable coalitions, which also makes it easier for citizens to know which party to blame if they are dissatisfied with government performance. This literature suggests that municipalities in Brazil using plurality systems, through their increased efficiency and accountability, will have better public good outcomes. Cleary s study on government performance in Mexico, is supportive of the theory that competition is not the primary driver of public goods. His study finds no correlation between competition and municipality government performance in Mexico. The study instead finding that an engaged citizenry impacts the quality of government (Cleary, 2007). However, Cleary uses literacy and poverty rates as two measures of political participation. These are confounding variables, since both literacy and poverty rates are impacted by the primary dependent variable: government performance. This close relationship between the main independent and dependent variables calls into question the results of his research, as variations in literacy and poverty rates may be caused by a different, omitted variable, such as competition. Ferraz and Finan also explain different municipality outcomes through mechanisms other than electoral competition, specifically looking at the impact of constitutionally mandated salary caps based on population for municipality legislators in Brazil (Ferraz and Finan, 2009). They find a positive correlation between higher salaries and better provision of health and education. The threshold used in this regression discontinuity is municipalities with over 200,000 registered voters the point at which the electoral system switches from plurality to majority systems. 5

7 Because regression discontinuities are strongest near the threshold, I will examine a smaller subset of municipalities that fall within the same salary bracket. 2 Even though Ferraz and Finan found a positive relationship between salary and public goods, which normally would need to be controlled for, I will not need to control for salary because they are already at the same level. 3 This means that any variation present is a result of different electoral systems and their competiveness rather than salary differences. Chamon et al. and Fujiwara offer theories formed from the Brazilian municipality-level experience, which is the unit of analysis of this paper, but other major theories, such as Mainwaring s argument, are at the national level. However, the Brazilian federalism allows municipalities enough autonomy that they act, in many ways, as small scale versions of the national political system. The Brazilian Constitution grants municipalities large amounts of autonomy, giving them constitutional power to approve their own laws and collect taxes ( The Constitution of the Federative Republic of Brazil, 2010, Articles 29-31). Powerful mayors govern the municipalities and receive funds from their state and the federal government to provide for the public welfare. Municipalities also have legislative branches that serve as checks to mayoral power. This means that while mayors have the means to enact their own policies, they still must answer to legislators much like the Brazilian president does. Additionally, it is worth noting that Duverger s law is strongest empirically at the district level, which in this case is the municipality, as each municipality is a single electoral district for the mayoral contest (Cox, 1997, pp. 70, 182). Mainwaring and Chamon et al. have contrasting views on the impact of competition, measured in this paper as the number of effective candidates and parties, on democratic 2 I will specifically be looking at municipalities with populations between 125,000 and 275, See Article 29 VI of the Brazilian Constitution for the list of population based salary brackets. 6

8 outcomes. This paper will endeavor to add clarity as to which system provides the most effective distribution of public goods in Brazil so that we can better understand the ways in which electoral systems can have the desired impact on citizens lives. Part III: Causal Model and Main Hypotheses Duverger s law states that plurality systems will create two-party systems, whereas majority and proportional representation will create multiparty systems (Cox, 1997; Fujiwara, 2011; LeDuc et al., 1996; Lijphart, 1995). The multiple rounds in majority systems give more parties incentives to run because parties merely need to receive a second place finish to compete in the second round of voting. Multiparty electoral systems are therefore likely to be more competitive because more candidates and parties are competing for votes. It is generally expected that increased competition, which includes higher numbers of effective candidates and parties, incentivizes politicians to increase public good provision (Besley and Burgess, 2002). With every additional effective candidate in an election there will be a smaller percentage of votes going to each candidate, thus every additional vote gained becomes more valuable to the candidate. Because each vote is more valuable to politicians in competitive elections, they will provide more public goods. Politicians use public goods rather than individual transfers because they are visible ways for politicians to show that they are providing for the interests of their electorate and because the economies of scale of public goods make them more efficient for larger populations. Therefore, we can expect politicians to provide visible public goods, such as food distribution in Besley and Burgess s study or school enrollment in the Brazilian case, when they rely on winning votes from a large section of the population to stay in office. 7

9 As previously stated, the primary hypothesis is that municipalities with majority electoral rules will have better public goods outcomes as compared to plurality systems. This hypothesis is supported by numerous researchers, such as Chamon et al., Gerring et al., and Lizzeri et al. My second hypothesis is that as the threshold between plurality and majority electoral rules is crossed, the number of effective candidates and parties will increase. This hypothesis is supported by the majority of literature on the effects of different electoral systems on party systems. My third hypothesis, which distinguishes this study from Chamon's study that looked at fiscal policy outcomes, is that as the number of effective candidates and parties increases, the rates of public goods provision will increase. This supports Besley and Burgess s findings of a positive relationship between electoral competition and public goods in India. My causal model states that politicians will provide public goods to signal to the electorate that they are providing for their interests and therefore should be elected or reelected. However, if an incumbent is not running for reelection, there may not be any incentive for him or her to provide public goods. There still may be incentives for politicians to maintain public support as they may have national aspirations or because they do not want to hurt their party s chances in the subsequent elections. It is possible that a stronger link between elections and public good outcomes would be seen if you analyzed the different levels of public goods provision between incumbents who are seeking reelection and those that are not. Unfortunately, time constraints will limit this research to investigating how competition impacts all politicians, regardless of their future electability. Part IV: Description of Data The unit of analysis is the municipality election year. Brazil has over 5,000 municipalities that follow the same legislation described above, but I limit my analysis to municipalities with 8

10 between 125,000 and 275,000 voters, following the example of both Chamon et al. and Fujiwara. In total, there are approximately 100 municipalities that fall within this range. The election data includes the municipality, candidate name and party, the percentages of the distribution of votes, and total votes for each candidate. Data from the 2000, 2004, 2008 and 2012 elections will be used to measure competition, expanding the number of important observations to over 400. This data was found online at Brazil s Tribunal Superior Eleitoral. 4 The number of voters registered in each municipality for every election was also taken from this website, and this data will be used to determine which electoral system each municipality used during a given election. The data on public goods outcomes comes from Brazil s 2000 and 2010 censuses, found on the website of the Instituto Brasileiro de Geografia e Estatística. 5 The data contains information on sewage, school enrollment for multiple age groups, literacy rates, racial breakdowns and income levels for each municipality. The census data has some missing information, but most of the missing data is generally for municipalities smaller than the populations I am most interested in. I weighted the census data by years before or after a given census in order to generate separate public good values for each year of interest. 6 The race variable is called minority and it is the sum of the percentage of the municipality s population that is black, mixed, Asian or indigenous. The poverty variable is the percentage of households in a municipality with income is less than ¼ the minimum wage, which is the lowest possible income bracket measured by the Brazilian census. 4 Election data website: 5 Census website link: 6 For 2004, I generated census data with this equation: Census2004 = (.6xCensus xCensus2010), with Census meaning the dependent variable of interest from that year. For 2008, the equation was: Census2008 = (.2xCensus xCensus2010). Census 2010 was coded as Census 2012 in order to match the election cycle. 9

11 Table 1 contains the summary statistics for all my main independent and dependent variables. The main independent variable for my first two regressions is a majority variable that takes the value of one if the number of registered voters in the municipality is above 200,000, which means it uses the two-round majority system rather than the plurality system. For my first hypothesis, the important public goods variables are literacy rate, which is the literacy rate by municipality for each election year, the school enrollment rates for three ages groups (zero to 14, 15 to 17, 18 to 24), and the variable no sewage, which is the percentage of households without sewage in a municipality. Table 1: Summary Statistics Variable Observations Mean Std. Dev. Minimum Maximum Total Population 59,050 58, , ,253,503 Registered Voters 60,364 41, , ,000 8,619,170 Dependent Variables Literacy Rate 59, No Sewage 57, Enrollment Rates Age Zero to 14 59, Age 15 to 17 59, Age 18 to 24 44, Effective Candidates 60, Effective Parties 45, Control Variables % Poverty 59, % Minority 59,

12 As Graphs 1-3 show, all three variables show a substantial change at the threshold, such as the jump in literacy rates, or the different trendlines before and after the threshold, as seen in the Enrollment and No Sewage graphs. These intial findings support my hypothesis that there is a change in public goods outcomes at the same point at which the electoral system changes. There are some missing observations, which are due mainly to missing data in the orginial censuses, but these missing observations generally make up less than 5% of the data. 7 7 The enrollment rate variable, Zero to 14, is missing 1.5% of the observations, 15 to 17 is missing 1.9% of the observations and 18 to 24 is missing 26% of the observations. The high number of missing observations in the 18 to 24 age range is due to highly irregular data that created enrollment rates for this age group that were above 100, which were then dropped. Because this age group has so few observations, I put more trust in the findings of the first two age groups. Literacy rate is missing 2.18% of the data and No Sewage is missing 5.4% of the data. These low levels of missing data should not significantly impact my results. 11

13 Effective Number of of Candidates Effective Number of Candidates Effective Number of Parties Effective Effective Number Number of of Parties Parties For my second hypothesis, the main independent variable is again the majority dummy variable, which takes the value of one if the municipality is a majority system and zero if the municipality has a plurality system. The dependent variables are the laakso variable, which is the number of effective candidates, and the laakso party variable, which is the number of effective parties. Both variables were calculated using the formula for effective parties proposed by Laakso and Taagepera (1979). The formula is: = s 1 1 where N is the number of parties that received at least one vote and S i is each party s proportion of all votes. Graphs 4-5 show that there is a noticeable jump in the mean number of effective candidates and parties, which supports my hypothesis that majority systems would have a higher number of effective candidates and parties. Graphs 4-5 s s 2 Effective Number of Candidates and Majority System Effective Number of of Candidates Parties and and Majority System Plurality System Majority System Plurality System Majority System As show in Table 1, the effective party variable has significantly less observations than the effective candidates variable, with approximately 25% of the data missing. This is due to the fact that the 2012 data for the nominal votes was unusable, which prevented me from calculating the effective number of parties for that year. I decided to run two regressions, one with the 12

14 effective number of candidates as the main dependent variable and another with the effective number of parties as the main dependent variable, in order to have an alternative measure of competition due to the missing observations for the effective number of parties. My third hypothesis uses the public welfare outcome variables (literacy, school enrollment, and no sewage) as the main dependent variables. It uses the interaction between majority dummy variable and the laakso effective party and candidate variables as the independent variable. The presence of the majority system will be used to estimate political competition with this estimation being used to determine how political competition, as determined by majority rule, impacts public goods outcomes. Part V: Research Design and Empirical Analysis Research Design I am interested in the impact that a quasi-natural experiment which shifts electoral rules has on the quality of a government s public goods provision. This research design is powerful because the main independent variable, electoral rules, is assigned at-random by a factor exogenous to the main dependent variables of interest. In Brazil, federal legislation mandates that in municipalities with more than 200,000 registered voters, mayoral elections use a majority system, where the top two candidates participate in a second round runoff if no candidate receives fifty-percent plus one in the first round. Municipalities under 200,000 use a single round plurality system. The assignment of electoral systems is based solely on the number of registered voters in a municipality, not any of the characteristics of interest. Because of this, the reason that [municipalities] are on a particular side of the threshold is due to random uncontrollable events that should not be related to the outcome of interest, which, in this paper, is public goods 13

15 Municipality Population Municipality Population outcomes (Fujiwara, 2011, p. 203). This as-if-random nature of the electoral rules allows researchers to establish causation between the electoral rules and the outcomes of interest. Because all municipality elections are regulated by federal legislation, which includes mandatory voting above the age of eighteen and uniform election days, voters do not have different incentives to vote depending on which electoral system is in place or when the election is held. Additionally, the federal nature of this legislation makes it unlikely that local politicians self-selected their own electoral rules for their own benefit. Indeed, Fujiwara found no evidence that municipalities tried to manipulate their voter registration data to choose an electoral system, as there was no significant jump in the number of municipalities on either side of the threshold when looking at population and registered voters (Fujiwara, 2011, p. 203). Graph 6 shows that for the data used in this paper there is also no significant change in the number of municipalities above or below the threshold, supporting Fujiwara s conclusion that this threshold was not manipulated by local politicians. This strongly suggests that politicians under each electoral system did not self-select to use certain electoral rules to make getting elected or offering less public goods easier. In terms of elections, this means that the only substantial variation in elections across municipalities is the electoral system, which was decided by the federal government. Graph 6 Municipality Population 600, , , , , , Number of Registered Voters

16 Naturally, other factors, such as the municipality population s poverty levels and racial characteristics, could conceivably affect the levels of public goods provided in a municipality. To test the as-if-random nature of the municipalities above and below the threshold, I ran descriptive summary tests on the racial makeup and poverty levels of the municipalities. Municipalities near the threshold fall above or below the threshold at random, as the federal government did not take municipality characteristics into account when designating the threshold. Chamon et al. states that because non-controlled factors will be randomly dispersed near the 200,000 threshold, there is nothing systematic that could affect political competition when we compare municipalities on both sides of the threshold besides the difference in electoral systems (Chamon et al., 2010, p. 13). In the similar studies done by Chamon et al. and Fujiwara, the characteristics used to test the similarity of the municipalities above and below the threshold were a mixture of geography, per capital monthly income, GINI coefficient, and the education levels and rural poulation variables. Both studies found no significant difference between municipalities on either side of the threshold. Because of the as-if-random nature of the municipalities and their characteristics around the threshold, differences in public goods outcomes on each side of the threshold are caused by the only significant variance the electoral system. The as-if-random nature of the threshold rule guarantees that any difference in outcomes between these two groups is a causal consequence of the different electoral rules (Fujiwara, 2011, p. 203). Instead of the characteristics tested by Chamon et al. and Fujiwara, I used the percentage of households with income less than ¼ the minimum wage, which is the lowest possible income bracket measured by the Brazilian census, as the poverty measurement. Due to data availability, I chose to use this particular poverty measurement as a stand-in for a more standard economic 15

17 0 0 Minority Population % Household Income less than 1/4 Minimum Wage % of Households w/income < < ¼ Minimum Wage variable. The racial makeup measurement was the percentage of the municipality s population. I intentionally included a measure of minority populations, because race can potentially determine who receives certain public goods, and also can determine who decides to run for election, with racism deterring potential candidates from seeking office, thus decreasing overall competition. Racism can create unequal opportunities making it difficult for minority groups to have the resources to run for office and potential candidates might be unwilling to enter the public spotlight due to racism. Initially I expected that because there was nothing about electoral rules that should impact these two characteristics, it would be unlikely that I would find a significant difference Minority % and Registered Voters Minority Rate and Registered Voters Graphs 7-8 Poverty and % and Registered Voters Voters Number of Registered Voters Number of Registered Voters above or below the threshold. However, as shown in Graph 2 and Graph 3, I did find substantial variation above and below the threshold for both race and poverty variables. These findings call into question the as-if-random nature of this regression discontinuity, as there seems to be differences in the characteristics of the municipalities above and below the threshold that are not caused by the differing electoral systems. Although the federal government s designation of the municipalities electoral systems was not determined by poverty and minority characteristics, these characteristics could be driving differences in public goods. For this reason, I included 16

18 them as controls in all my regressions, because of their possible impact on the dependent variables. Both graphs unexpectedly suggest that minority and poverty percentages are impacted by the change in electoral rules. As shown in Appendix Table 3, minority and poverty percentages are highly correlated, with the percentage minority predicting nearly 41% of a municipality s households in poverty percentages. However, this is not a perfect correlation, meaning other factors besides the population of minorities determine poverty levels, and one such factor could be the electoral system. After further investigation, it seems that low levels of poverty might be a dependent variable, caused by the same benefits of the majority system that I expected would create higher levels of public goods. The unexpected decrease in minority percentages in majority systems, as shown in Graph 2, is more difficult to interpret and lacks a clear explanation, as the threshold rule should have no impact on minority groups. One possible explanation for this relationship is that minorities, especially indigenous communities, may be more likely to live in rural areas in smaller, more homogenous municipalities. If that is accurate, the graph could be demonstrating a natural break in the demographics between smaller and larger municipalities. Because of this unexpected finding, all regressions kept minority percentage as a control variable because this characteristic, although unconnected to electoral rules, certainly has some impact on public goods outcomes. My third hypothesis does not use a regression discontinuity, but instead uses majority systems as an instrumental variable that predicts the number of effective parties. For an instrument variable to be valid, two assumptions must hold. First, the instrument must be independent of potential outcomes, meaning that it is uncorrelated with any determinates of the dependent variable. The second assumption is that the instrument affects the outcome of interest 17

19 - in this case, public goods outcomes - only through its impact on the dependent variable of interest - in this case, political competition. The first assumption should hold because the majority system rule directly impacts the number of parties that form, but it was assigned without regard to the characteristics of the town, including public goods outcomes and municipality characteristics. Although the minority and poverty characteristics are not as-if-random, the threshold itself, as shown in Graph 1, was assigned as-if randomly to the municipalities near the cutoff. As for the second assumption, Appendix Table 6 shows that effective candidates and parties have a strong positive correlation with the majority electoral system in my data set, so it is reasonable to expect that the change in electoral systems is driving the increased competition. I hypothesize that the primary way in which majority systems improve public goods outcomes is through increased electoral competition. Other characteristics of majority systems that could impact public goods, such as more representation for underrepresented groups, could be considered a facet of electoral competition, as majority systems may encourage minority participation, thus increasing overall competition. If the change in electoral system is driving competition and competition is the driver of public goods outcomes, the second assumption for instrumental variables would also hold. Because these two assumptions are met, I can establish causation because the competition measure will be exogenously determined by the electoral system. Fujiwara (2011) used a local polynomial regression equation to estimate relationships using this discontinuity. His equation included an assignment variable, which was the number of registered voters subtracted by the threshold and the absolute assignment variable, which is the absolute value of the registered voters subtracted from the threshold. This variable tells us how far away an observation is from the threshold, allowing us to create different bandwidths around 18

20 the threshold. Following Fujiwara s example, I used bandwidths that ran the regression for observations where the number of registered voters is less than 25,000, 50,000, and 75,000 voters away from 200,000. This means that for the smallest bandwidth of 25,000, I looked at municipalities with between 175,000 and 225,000 registered voters. The 50,000 bandwidth included municipalities with between 150,000 and 250,000 registered voters and the 75,000 bandwidth had municipalities with between 125,000 and 275,000 registered voters. Because we would expect municipalities nearest to the threshold to be the most similar in everything except their electoral system, we expec t to see the strongest results at the 25,000 bandwidth. As the equation measures municipalities further from the threshold, the likelihood of the municipalities on either side of the threshold being comparable decreases. This makes the electoral system one of many distinguishing characteristics, thus we would expect to see a weaker connection. Empirical Analysis The first hypothesis is that majority systems will have higher levels of public good outcomes as compared to plurality systems. In this hypothesis, the independent variable is the type of electoral system the municipality uses for each election year and the dependent variables are the public good outcomes by municipality year. Public good outcomes are measured by primary school enrollment, secondary school enrollment, literacy rates and sewage provision. The estimating equation is: (1) ssssssssssssssssss ssss ss = s + s 1 Where Public Good it is a public good outcome in municipality i at time t. In general, I found a rise in public good outcomes between 2000 and 2010 due to Brazil increasing development. Because the electoral rules are unchanging and should yield similar levels of competition within each system, I still expected to see a marked difference in public good 19

21 outcomes between plurality and majority systems. 1{ssssss ss > 200 iis a dummy variable that takes the value of one if the election takes place using two-round majority rules, which is when there are more than 200,000 voters in the municipality. Voters it shows the variations in registered voters between municipalities at year t. X it is the matrix for the race and poverty controls used because I found variation in these characteristics above and below the threshold. Fixed effects were included for the year. Table 2 shows the regressions for the zero to 14 school enrollment percentages, the literacy rate and the percentage of households without sewage at each bandwidth. Although regressions were run for all three age groups, the results were similar and insignificant. For the sake of clarity, only the results for the zero to 14 age group are shown. 8 At the 25,000 bandwidth, where we expect to see the most significant results, the majority system has a negative, but insignificant effect on enrollment in the age group zero to 14. If significant, this would mean that majority systems cause school enrollment rates to decrease. This relationship trend opposes my hypothesis and instead leans towards Mainwaring s view that majority systems lead to worse governance. Table 2 also shows the regression coefficients for the literacy rates and the percentage of households without sewage. With controls, the majority of the coefficients were insignificant at the optimal 25,000 bandwidth. For the literacy variable, the 25,000 threshold showed an insignificant positive relationship between literacy rates and majority systems. This would mean that municipalities with majority systems would have higher literacy rates as compared to plurality systems, but the strength of this relationship is too weak to confirm my 8 The regressions for the 15 to 17 and the 18 to 24 age groups can be found in Appendix Table 1. 20

22 hypothesis. Additionally, at the larger thresholds the relationship becomes negative, which also contradicts my initial hypothesis. Table 2: Public Goods Outcomes (1) (2) (3) (4) (5) (6) (7) (8) (9) Enrollment, Ages Zero to 14 Literacy Rate No Sewage VARIABLES 50,000 25,000 75,000 50,000 25,000 75,000 50,000 25,000 75,000 majority * (1.142) (1.918) (1.086) (0.326) (0.391) (0.390) (0.639) (0.793) (0.774) Voters * 0.000** * * (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) Votersxmajority * * 0.000** (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) Minority % (0.042) (0.048) (0.038) (0.018) (0.018) (0.016) (0.023) (0.023) (0.019) - Poverty % * *** ** 0.595*** 0.362* 0.277* 0.525*** (0.167) (0.200) (0.154) (0.163) (0.158) (0.128) (0.187) (0.160) (0.145) Observations , , ,344 R-squared Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 The no sewage regression with controls shows a negative, insignificant relationship between majority systems and the percentage of the population without sewage in a municipality. If significant, this would mean households in majority system municipalities have more access to sewage than households in non-majority system municipalities - supporting my hypothesis that majority systems create better outcomes for citizens. However, its insignificance also contradicts my hypothesis. As a whole the general lack of significance between majority systems and public goods in these regressions may show a need for more observations. If the lack of significance is because 21

23 of a need for more observations, additional electoral years and census data could be added to strengthen the results. Based on the trends seen in literacy rates and sewage percentages, strengthening the results by adding more observations could show stronger support for my hypothesis that majority systems create better public goods. It is also possible that the dependent variables representing public goods provision, which were chosen based on data availability, are not particularly sensitive to changes in government performance. The lack of significance could also mean that there is no significant relationship between electoral systems and public goods provision, at least within Brazilian municipalities. This would signal that changing electoral rules should have little to no effect on public goods. This could encourage Brazilian policy makers to experiment with electoral rules in order to achieve other policy goals with the knowledge that public goods provision, an issue voters may care about, will not be changed in the process. Conversely, these findings could signal policy makers to look more seriously at other mechanisms to incentivize better public goods outcomes. The second hypothesis states that municipalities with majority electoral rules will have more effective parties and candidates than municipalities with plurality electoral rules. The estimating equation is: (2) sssssss ss = s + s 1{ssssss ss > 200,000} + s Where POLCOMP it is the number of effective parties at the municipality level i for a given election year t. 1{ssssss ss > 200} is a dummy variable that takes the value of one when the municipality use majority rules. Voters it show s the variations in registered voters between municipalities at year t. To test my second hypothesis that majority systems create higher numbers of effective parties and candidates, I used Laakso and Taagepera s effective number of parties formula, which can be found in Part III. Year fixed effects were included. 22

24 Table 3: Effective Candidates and Effective Parties (1) (2) (3) (4) (5) (6) Effective Candidates Effective Parties VARIABLES 50,000 25,000 75,000 50,000 25,000 75,000 majority * (0.327) (0.565) (0.268) (0.395) (0.675) (0.337) Voters (0.005) (0.018) (0.003) (0.005) (0.020) (0.003) Votersxmajority (0.012) (0.028) (0.006) (0.012) (0.029) (0.007) Minority % ** (0.007) (0.007) (0.006) (0.007) (0.010) (0.006) Poverty % (0.024) (0.028) (0.020) (0.028) (0.043) (0.020) Observations , ,017 Cluster R-squared Regressions were ran at bandwidths 25,000, 50,000 and 75,000 voters away from the threshold Observations clustered by municipality Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 Table 3 shows the results from the regression. At the 25,000 bandwidth, the number of effective candidates shows a (insignificant) negative relationship with the majority system, indicating that the number of effective candidates goes down with a majority system, which goes against my hypothesis. However, at the largest bandwidth for the number of effective candidates, there is a positive relationship at the 90% significance level showing that majority systems do create an increase in the number of effective candidates. For the number of effective parties, all coefficients are positive, but insignificant, showing a trend that suggests majority systems do increase the number of effective parties. As a whole, these findings suggest a need for more observations, especially because the only significant coefficients are found at the larger 23

25 bandwidths that have more observations. Both sets of regression have variation across bandwidths, which is unexpected and may also point to a need for more observations. The third hypothesis states that if the effective number of candidates or parties increases, public goods outcomes will also increase. To test this, I used a two-staged least-squared regression (2SLS), using the first stage to estimate how much political competition is determined by majority systems. The second stage used this estimation to determine how political competition, as determined by majority rule, impacts public goods outcomes. The estimating equations are as follows: (3) POLĈOMP it = s + sssssssss ss + s (4) ssssss ssss ss = s + spolĉomp it + s Where POLĈOMP it, the number of effective parties in a given election year t for each municipality i, as predicted by the instrumental variable, the use of majority systems. Public Good it is a public good outcome at the municipality level i for an election year t. X it represents the control variables for race and poverty. Year fixed effects were included. My results for my third hypothesis are highly significant at the 1% level for all my public good variables and supports, for the most part, my hypothesis is that competition increases public good outcomes. Table 4 shows the results for the number of effective candidates. The results for the number of effective number of parties, which showed a similar relationship, can be found in Appendix Table 2. 24

26 Table 4: Effective Candidates and Public Good Outcomes VARIABLES (1) (2) (3) Enrollment, Ages Zero to 14 Literacy Rate No Sewage Effective Candidates 3.850*** 7.265*** 3.007*** (0.976) (1.311) (0.930) Minority Rate *** *** 0.050*** (0.006) (0.007) (0.007) Poverty Rate *** *** 0.749*** (0.014) (0.015) (0.018) Observations 58,919 58,497 56,696 Cluster 5,265 5,265 5,259 R-squared Regressions were ran at bandwidths 25,000, 50,000 and 75,000 voters away from the threshold Observations clustered by municipality Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 Table 4 shows that for effective candidates, there is a significant, positive relationship between all measures of public goods outcomes and the number of effective candidates, which generally supports my hypothesis. For enrollment percentages and literacy rates, the regressions also show that as party competition increases, the enrollment rates for ages zero to 14 and the literacy rates increase. This supports my hypothesis and the theory that electoral competition improves the government s provision of public goods. The positive relationship between the number of effective candidates and the percentage of households without sewage is also positive. This means as the number of candidates increases, the number of households without sewage also increases, which was an unexpected finding that does not support my hypothesis. It is possible that because sewage is an issue that is not widely discussed, candidates may not feel pressured to improve household sewage rates, even in competitive settings 25

27 Although municipality poverty percentages were controlled for in all regressions, I was interested in investigating if the levels of poverty of municipalities were caused by the type of electoral system. The number of households in poverty could be affected by how capable the government is at providing public goods and services since poverty itself could be reduced through the transfer of public goods. To test this, I ran a regression to see to what degree majority systems determine the rate of households with ¼ of the minimum wage. Table 5 shows the results from that regression, which shows that the majority system appears to significantly decrease the number of households in the lowest income bracket as compared to plurality systems. These results are strongest nearest the threshold, at the 25,000 bandwidth, which is what we expect in a regression discontinuity. Because the coefficients are so significant at the optimal bandwidth, it suggests that the percentage of households in poverty is particularly sensitive to the change in electoral rules at the threshold. These results would strongly suggest that rather than being a control variable, the number of households in poverty is impacted by the type of electoral system. Furthermore, it suggests that majority systems are better at decreasing the number of households in poverty, which in turn could increase public goods outcomes, possibly through increased resources at the individual and municipality level. Part VI: Conclusion One of the primary roles of any government is to provide public goods for its citizens, and it is believed that democracies offer the best mechanisms to achieve that role. A defining characteristic of democracies are free, fair and competitive elections. This paper investigates ways in which this characteristic allows democracies to better provide for their citizens. LeDuc et al. suggests that there is tradeoff between fairness and responsiveness in non-plurality 26